Aerospace firms and the Government have announced a £2 billion investment to keep the UK at the forefront of world manufacturing.
The Government is investing £1 billion and the aerospace industry is matching the amount, with the money to be invested over a seven-year period to create a UK Aerospace Technology Institute.
The institute will help to develop the next generation of quieter and more energy-efficient aircraft and it is estimated the investment will secure in the long term up to 115,000 jobs in the aerospace industry and its supply chain.
The announcement was made by Deputy Prime Minister Nick Clegg during a visit to Airbus in Filton, Bristol.
Mr Clegg said: "Aerospace experts with highly specialised skills are working hard to make sure the UK remains Europe's number one aerospace manufacturer.
"We're doing all we can to maintain this jewel in our crown, which is why government is working hand in hand with industry to inject £2 billion into a unique long-term strategy to maintain Britain's position as the centre of aerospace technology.
"The UK's best technical experts can ensure we remain the world's preferred supplier and continue to build and design the planes of the future; lighter, quieter, faster and more fuel- efficient."
Among the firms taking part in the Aerospace Technology Institute are Airbus, GKN Aerospace, Rolls-Royce, ADS, Messier-Dowty and AugustaWestland.
Business Secretary Vince Cable, who chairs an aerospace business leaders' group, said: "This long-term commitment of £2 billion investment in aerospace research and development, half Government, half private, will anchor the sector in the UK for a long time to come.
"Our aerospace sector already supports more than 3,000 companies and employs 230,000 people across the UK. The potential for growth is huge. By 2031 the civil aerospace market will be worth in excess of $4.5 trillion."
Marcus Bryson, chief executive officer of GKN Aerospace and Land Systems and co-chair of the Aerospace Growth Partnership, said: "Today's announcement is the culmination of a lot of hard work from ministers, civil servants, academics, ADS and industry through the AGP.
"The creation of an Aerospace Technology Institute puts the UK in a strong position to deliver the technologies, skills, capabilities and investment we need to take advantage of the exciting growth opportunities that are forecast for the sector.
"There is still much to do, but today's announcement is a significant step forward and there is no doubt that it will help safeguard this valuable sector to benefit of the nation for decades to come."
Responding to the announcement Katja Hall, chief policy director at the CBI, said the move was a positive one.
She said: “This is an ambitious strategy showing the Government can balance the long view with shorter-term priorities.
“Funding for the creation of a new Aerospace Technology Institute will consolidate the UK’s position as a world leader in aerospace, helping the sector grow further and remain internationally competitive.
“The additional £500 million for other key sectors, such as automotive, is a useful first step in supporting some of our champion industries.”